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Here’s why it might be a good idea to retire in Alaska

BY Elizabeth Shell  March 31, 2014 at 7:37 PM EDT
A glacier in Prince William Sound, Alaska

A glacier in Prince William Sound, Alaska. Photo by Mike Fritz/PBS NewsHour

Many Americans dream of retiring to the sunbelt, where they can live out their work-free years playing on sun-kissed golf courses and lounging poolside. But analysis by the National Institute on Retirement Security reveals seniors might want to consider trading their Bermuda shorts for ear muffs.

Overwhelmingly, cold states and states in the upper Midwest ranked more financially secure for retirees. Wyoming, Alaska, Minnesota, North Dakota and Iowa boast more generous benefits, more working opportunities and better-funded services for seniors than popular retirement destinations like Florida and Arizona.


 

Which states rank best for retirees?

States rated for overall financial security for future retirees

overall

Roll over states to see scores. Possible scores ranged from 1 to 51, with 1 indicating higher average performance across variables. The top-scoring state was Wyoming, at 8.9. See the full breakdown.

Some state governments are stepping in where the federal government is failing to provide aid for financially insecure seniors, Rhee said. And in the coming years, retiring Americans are going to need all the help they can get.

“We’re screwed,” said Nari Rhee, research manager at the National Institute on Retirement Security. She was referring to the dual issue of workers who want to maintain their standard of living when they retire, but who don’t have enough socked away in savings accounts.

LTC promo NIRS table

“The Employee Benefit Research Institute estimates 44 percent of Baby Boomers and Gen X-ers will not have enough money to meet even basic expenses in retirement,” Rhee said. “We’re not just talking about people experiencing downward mobility, but of people having a hard time making ends meet.”

We’ve reported on how much Americans worry about their retirement. Another recent survey by EBRI showed that nearly half of Americans have little or no confidence they’ll have enough money for a comfortable retirement. More than ever before, Americans are likely to face a downgrade in their economic mobility when they retire. And half haven’t saved anywhere near enough for retirement.

With the record lack of confidence coupled with overall low balances in retirement accounts, Rhee points to how states have begun taking on retirement security policies.

“States are increasingly concerned about this,” she said. “We’re not seeing a lot of federal action. So some states are stepping in, saying, ‘What can we do to help increase savings?’”

States need to play a role, Rhee says, because the current private-sector plans that leave the financial decisions to the employee — including how to invest and whether to participate in the first place — are doomed for failure. No country that has a voluntary retirement system, she says, has good outcomes.

No country that has a voluntary retirement system has good outcomes, Rhee says.“The countries that do well with people having enough income [for retirement] is where they make it mandatory, quasi-mandatory or at the very least automatic,” Rhee said. “We shouldn’t have a retirement system predicated on people being financial wizards.”

To asses how well states rank, Rhee and others at NIRS considered a variety of factors ranging from average retirement account balances to the unemployment rate for seniors, to determine the level of financial pressure retirees on average would likely face in their state. The result was a comparative ranking.

A major source of financial pressure comes from the costs associated with long term health care, estimated at $426 billion a year and including $234 billion of informal care. The Medicare out of pocket costs is an indicator of local health care costs.

“Conditions for future retirees varies at state levels,” Rhee said. “All states are struggling, but at the same time, some states do better than others. California is really poorly off in terms of housing costs, medical costs, unemployment, wages. Wyoming has the second most generous Medicaid program in the country and relatively high workplace retirement coverage.”

One of the main goals of the report was to help states understand where policymakers need to pay more attention. More and more states, Rhee said, are recognizing there is a problem. “At the end of the day it’s still coming out of their pay. They’re still being responsible, you’re just making it easier on them,” Rhee said.

You can see the full breakdown and how your state ranks on things like wages and housing costs here. Below, we’ve mapped how states ranked in the three categories.


 

Where can you find a bargain retirement?

States rated for retiree cost indicators

retirement-income2

Roll over states to see scores. Possible scores ranged from 1 to 10, with 10 indicating a higher performance in this category than lower scores. For scoring state’s retiree costs, the average of three variables were used: Medicare out-of-pocket spending, Medicaid generosity, and housing cost burden.

 

Which states provide the most income for seniors?

States rated for retirement income indicators

retiree-cost2

Roll over states to see scores. Possible scores ranged from 1 to 10, with 10 indicating a higher performance in this category than lower scores. For scoring state’s retirement income, the average scores of three variables were used: workplace retirement plan participation rates, defined contribution account balances, and marginal tax rates on pension income.

 

Which states have the most work for seniors?

States rated for labor market indicators for retirees

labor-market2

Roll over states to see scores. Possible scores ranged from 1 to 10, with 10 indicating a higher performance in this category than lower scores. For scoring the state’s labor market, the average of two variables were used: the unemployment rates for adults 55+, and median weekly earnings.

On the upside, Rhee notes that a silver lining to the report’s findings is that state legislators and others can move towards changing the course of savings programs so that future retirees aren’t staring down the loss of their financial independence when they retire.

“There is time for states to set up programs so workers who are in their 20s, 30s, 40s now will have a better outcome,” she said. “If they act now.”

See NIRS’ full report, “The Financial Security Scorecard: A State-by-State Analysis of Economic Pressures Facing Future Retirees,” including detailed analysis of variables and methodology, here.

This post was updated April 1 at 7:12 p.m. EDT. Missouri was inadvertently not included in the table.